Edelbrock Corp. Reports Double-Digit Gains in Sales and Earnings
8 September 1999
Edelbrock Corp. Reports Double-Digit Gains in Sales and Earnings for Both Fiscal 1999 Fourth Quarter and Year; Quarterly Sales Up 15%, EPS Climbs 21%
TORRANCE, Calif.--Sept. 8, 1999--Edelbrock Corp. Wednesday reported that effective cost controls coupled with continued strong demand for a range of key product lines -- particularly aluminum automotive cylinder heads, automotive manifolds and the Company's Performer Series carburetors -- led to record sales and earnings performance in its fiscal 1999 fourth quarter and year ended June 30, 1999.For the fourth quarter of fiscal 1999, revenues rose 15% to $33.8 million from $29.4 million in the comparable quarter a year ago. Net income for the fiscal 1999 quarter, reflecting the higher sales and lower general and administrative expenses as a percentage of sales, improved 19% to $2.9 million, or $0.54 per diluted share, compared with $2.4 million, or $0.45 per diluted share, a year ago.
For fiscal 1999, revenues increased 14% to $108.9 million from $95.5 million in fiscal 1998. Net income for the fiscal 1999 period improved 28% to $7.4 million, or $1.40 per diluted share, from net income of $5.8 million, or $1.08 per diluted share, in fiscal 1998.
Net income for fiscal 1999 was net of Edelbrock's payment of $190,000, or $0.02 per after-tax diluted share, to settle remaining legal issues associated with the Chapter 11 Bankruptcy of Super Shops Inc. and the write-off of uncollectible receivables of $400,000, or $0.05 per after-tax diluted share, which related to the Chapter 7 Bankruptcy of Champion Auto Stores Inc.
Excluding those expenses, net income for fiscal 1999 would have been reported as $7.8 million, or $1.47 per diluted share. Net income for 1998 was reduced by a $1.9 million pre-tax charge taken against earnings for the write-off of unsecured receivables with Super Shops, which represented a $0.22 after-tax adjustment to diluted earnings per share.
The double-digit improvement in fourth quarter sales was driven primarily by a strong increase in demand for Edelbrock's automotive carburetors and its highly regarded aluminum automotive cylinder heads, sales of which rose 17% and 57%, respectively, over the fourth quarter of fiscal 1998.
The Company attributed these continuing increases to its aggressive advertising that capitalized on America's continued love affair with the automobile; in particular, street rods and specialty vehicles, in addition to the truck and sport utility market. This, coupled with the nation's growing interest in motorsports in which a strong majority of Edelbrock's customers are loyal fans, and Edelbrock's association as a major sponsor of NASCAR, has allowed the Company opportunities to expand its product base.
A range of cost-cutting measures added to pre-existing cost-controls enabled Edelbrock to reduce selling, general and administrative (SG&A) expenses, as a percentage of sales, in the fourth quarter of fiscal 1999 to 24.1% from 25.5% in the year-ago period. Overall, SG&A expenses increased 9%, or $646,000, to $8.2 million, from the fiscal 1998 quarter.
For fiscal 1999, SG&A expenses increased 14% over fiscal 1998, yet decreased slightly to 25.3% of sales from 25.4% a year ago. The increase in SG&A expenses for the fiscal 1999 fourth quarter and year resulted primarily from costs associated with the company-wide implementation of the QS 9000 quality standard and advertising and promotional activities to support the Company's expanded base of products and vehicle applications.
Research and development expenses for the fourth quarter of fiscal 1999 decreased 13% to $1.1 million, or 3.1% of revenues, from the $1.2 million, or 4.1% of revenues, recorded in the comparable period last year as Edelbrock concentrated on bringing a host of new products already under development to market. For fiscal 1999, R&D expenses increased 9% to $3.2 million, or 3.0% of revenues, from $3.0 million, or 3.1% of revenues, in fiscal 1998.
Commenting on the Company's results, Edelbrock Chairman and Chief Executive Officer Vic Edelbrock said, "The tremendous success we're experiencing today is directly attributable to two things: an exceptional market for performance products characterized by an unprecedented -- and growing -- interest in motorsports, and our ability to position Edelbrock within that market as one of the companies best able to help bring the thrill of racing home to the consumer.
"For example, according to a recent NASCAR study, in the last eight years alone NASCAR race attendance has nearly doubled. Television ratings have climbed to the point where they are now second only to the National Football League's, and retail sales of NASCAR-licensed products have exploded to the point where they're now expected to surpass a billion dollars this year.
"What this illustrates is a powerful and, importantly, a long-lived trend that affords exceptional opportunities for companies that are closely identified with motorsports," Edelbrock said.
"For many years, through active sponsorship of NASCAR and other motorsports organizations, in addition to a variety of other aggressive marketing activities, we at Edelbrock have worked hard to be one of those companies, and as our results for fiscal 1999 indicate, we are very well positioned to continue to make the most of motorsports' increasing popularity.
"Today, because of those marketing efforts, our visibility to race fans has never been higher, and just this year Edelbrock intake manifolds became the officially licensed manifold of NASCAR. Besides being a tremendous honor in itself, this promises to elevate our visibility even further to the millions of potential customers around the world who view NASCAR races in person or on television.
"Our R&D program remains among the best in the business, and we are continually upgrading our manufacturing facilities, which right now are state-of-the-art, to ensure that we maintain the highest quality possible as volume continues to grow. In October, we'll be opening a new 66,000 square-foot 'state of the art' distribution center that will take us to the next level of efficiency in moving product to our various sales channels.
"The facility will feature a new warehouse management software that, in addition to enhancing distribution efficiency, will also enable our customers to quickly determine, via the Internet, the status of their orders. Our current distribution facility will be retrofitted to accommodate increased manufacturing capacity in which specialized 'CNC' machines have been ordered and tooling is under development to meet our future capacity needs.
"Our solid infrastructure, when combined with the high level of awareness Edelbrock has developed among consumers as a premier manufacturer of high-quality performance products, and a robust market makes us tremendously excited about both our present and our future," Edelbrock concluded.
Founded in 1938, Torrance-based Edelbrock is recognized as one of the nation's premier designers, manufacturers and distributors of performance replacement parts for the automotive and motorcycle aftermarkets.
In addition to three production facilities in Torrance, the Company owns and operates a state-of-the-art aluminum foundry and its QwikSilver Division for motorcycle aftermarket parts in San Jacinto, Calif., at which it manufactures many of its quality products.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve known and unknown risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as the financial strength and competitive pricing environment of the automotive and motorcycle aftermarket industries; product demand; market acceptance; manufacturing efficiencies; new product development; the success of planned advertising, marketing and promotional campaigns; the success of the Company's, its vendors' and its suppliers' year 2000 compliance programs; and other risks identified herein and in other documents filed by the Company with the Securities and Exchange Commission.
EDELBROCK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Fiscal Year ended
June 30, June 30,
1999 1998 1999 1998
Revenues $ 33,773,000 $ 29,424,000 $108,943,000 $ 95,504,000
Cost of sales 20,067,000 17,105,000 65,881,000 57,410,000
Gross profit 13,706,000 12,319,000 43,062,000 38,094,000
Operating
expenses
Selling,
general and
administrative 8,156,000 7,510,000 27,564,000 24,281,000
Research and
development 1,050,000 1,207,000 3,237,000 2,972,000
Write-off of
uncollectible
receivable -- -- 400,000 1,878,000
Settlement
expense -- -- 190,000 --
Total operating
expenses 9,206,000 8,717,000 31,391,000 29,131,000
Operating income 4,500,000 3,602,000 11,671,000 8,963,000
Interest expense 51,000 63,000 203,000 269,000
Interest income 76,000 189,000 304,000 410,000
Income before
taxes on income 4,525,000 3,728,000 11,772,000 9,104,000
Taxes on income 1,663,000 1,315,000 4,344,000 3,304,000
Net income $2,862,000 $2,413,000 $7,428,000 $5,800,000
Basic net income
per share $0.55 $0.46 $1.41 $1.10
Diluted net
income per share $0.54 $0.45 $1.40 $1.08
Basic weighted
average number
of shares
outstanding 5,241,000 5,257,000 5,251,000 5,252,000
Diluted weighted
average number
of shares
outstanding 5,280,000 5,377,000 5,302,000 5,388,000
EDELBROCK CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1999 1998 (Unaudited)
(Unaudited)
ASSETS
Current assets
Cash and cash
equivalents $13,685,000 $ 8,370,000
Accounts
receivable, net 23,976,000 21,222,000
Inventories 17,155,000 16,776,000
Prepaid expenses
and other 1,261,000 1,288,000
Total current assets 56,077,000 47,656,000
Property, plant
and equipment, net 36,708,000 35,676,000
Real estate
properties, net 482,000 902,000
Other 985,000 741,000
Total assets $94,252,000 $84,975,000
Current liabilities
Accounts payable $16,037,000 $14,724,000
Accrued expenses 4,548,000 3,610,000
Current portion of
long-term debt 69,000 62,000
Total current liabilities 20,654,000 18,396,000
Long-term debt 2,065,000 2,123,000
Deferred income taxes 2,882,000 2,725,000
Shareholders' equity 68,651,000 61,731,000
Total liabilities and
shareholders' equity $94,252,000 $84,975,000